U.S. Existing Home Sales Drop 1.2% in January

WASHINGTON—Sales of previously owned homes fell in January, although a decline in home prices and mortgage rates could bode well for a pickup this spring.

Sales fell 1.2% in January from the prior month to a seasonally adjusted annual rate of 4.94 million, the National Association of Realtors said Thursday. That undershot economists’ expectations for an increase to 5.02 million. December’s sales were revised higher to a 5.0 million rate.

January marked the third consecutive month of declining sales, and last month’s 4.94 million home sales were the lowest since November 2015. Compared with a year earlier, sales in January declined 8.5%.

Lawrence Yun, the association’s chief economist, said weak sales in January were likely to mark a cyclical low given moderating home prices and gains in household income.

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“The continued slowdown in price growth coupled with higher household income is making homes more affordable to more people,” said Robert Frick, an economist at Navy Federal Credit Union. If mortgages rates stay lower, “many of last year’s discouraged home shoppers could see enough opportunity to make them home buyers this year,” he added.

Interest rates were on the rise for most of 2018, but cooled at the turn of the year. The average rate on a 30-year, fixed-rate mortgage was 4.35% the week ended Feb. 21, down from 4.94% in mid-November, according to Freddie Mac.

Inventories of existing homes for sale rose 3.9% to 1.59 million in January. At 3.9 months’ worth of supply, inventories were up slightly from 3.7 months in December, the realtors’ group said.

The national median sale price for a previously owned home last month was $247,500, up 2.8% from a year earlier, marking the 83rd straight month of year-over-year gains. Still, the 2.8% rise was the slowest year-over-year increase since February 2012. The median price in January was also down slightly from $254,700 in December.

Some housing-sector data were delayed recently due to the partial government shutdown. The Commerce Department’s report on housing starts in December will be released Feb. 26, more than a month later than previously scheduled.

“With the official data over a month behind and the government shutdown potentially distorting the early-2019 data, we are at least two full months away from getting a meaningful reading on the housing market,” said Stephen Stanley, chief economist at Amherst Pierpont Securities, in a note to clients.

Still, the January data indicated that the housing market started the first quarter on a weak footing. Last year was the weakest for home sales since 2015. Buyers pulled back in the latter half of 2018, as rising mortgage rates, high home prices, a volatile stock market, concerns that prices would start declining and anxiety about the national political situation all caused a number of buyers to hit pause.

The Trump administration’s 2017 tax law also reduced some incentives for homeownership—especially in costlier, high-density markets and high-tax areas—by reducing the cap for the deductibility of mortgage interest and limiting the amount of state and local taxes that can be deducted.

A gauge of U.S. home-builder confidence increased in February for the second consecutive month. The National Association of Home Builderson Tuesday said its index of builder confidence in the market for new single-family homes rose to 62 in February from 58 in January.